Adding Fuel To The Fire

Not too many years ago, higher fuel prices were a non-issue with CropLife® 100 retailers. Indeed, in the 20th annual survey of the nation’s top ag retailers in 2003, fuel prices didn’t even rank among the top five issues when respondents were asked to list their key market concerns for the year. The following year, 2004, fuel prices again failed to register.

My, how things have changed. From a non-issue during the early 2000s, fuel prices have become the issue during the middle years of the decade. In our magazine’s 22nd annual CropLife 100 survey last year, concern over higher fuel prices easily led the field of top limiting growth factors at 53%.
Moving into 2006, higher fuel prices again look to be on pace to lead the top five limiting-factors pack. Although it’s still early in the survey collection process (with approximately 35% of the forms returned at presstime), 60% of responding retailers have indicated higher fuel prices as the biggest challenge to their profitability moving into the 2007 growing season.

“We are experiencing big pressure on margins and high expenses for things such as fuel,” says Peter Vail, president of Carolina Eastern-Vail, Inc., Niverville, NY. “At this time, we have not been able to recoup these added expenses.”

Presenting something of a perfect economic storm for retailers, there are indications that higher fuel prices are among the many factors that have severely curtailed grower-customer spending in 2006. According to Dan Kennedy, general manager for Ritter Crop Services, Marked Tree, AR, “the farm economy in general” is the biggest growth-limiting factor facing his company’s market at the moment.

And this downturn isn’t limited to Arkansas. According to the Economic Research Service, grower income is forecast to be down 26% for 2006 to $54.4 billion. More troubling, this figure is below the average 10-year grower income level of $57.2 billion.

Charging More

Not surprisingly, most retailers have responded to this fuel price crunch with multiple programs to recover their expenses. In CropLife’s 2005 CropLife 100 survey, we asked retailers how they were dealing with higher fuel costs. Seventy-one percent indicated they were simply charging more for their application work. The second most popular choice was adding a fuel surcharge to their grower-customer bills at 35%. Several retailers were employing both options in 2005 (hence the 106% total percentage figure illustrated in the numbers, because the question asked for respondents to mark all options that were being tried). Still, somewhat surprisingly, almost one in four (24%) of the CropLife 100 retailers in 2005 weren’t trying to recover their higher fuel costs from grower-customers. Perhaps these retailers were afraid adding such costs to their service fees would convince their clients to “shop around” and leave them.

This reluctance has apparently subsided in 2006, however. According to the surveys turned in so far for this year’s CropLife 100, just short of 90% of responding retailers are charging more or adding fuel surcharges to their grower-customer bills.

Of course, a few retailers have employed novel approaches to keep their businesses profitable in this higher fuel price climate. According to Kathy Sims, president of Sims Fertilizer & Chemical Co., Osborne, KS, her company’s grower-customers have helped curb costs through their growing practices. “The continual growth of no-till farming has been key for our business to combat high fuel and operating costs,” says Sims. “We’ve seen significant growth in the last few years.”

Others foresee higher fuel prices leading to some previously untapped market opportunities, for grower-customers and their dealerships alike. “Ethanol should increase corn acres, which will be good for us,” says Dennis Montavon, general manager for Effingham Equity, Effingham, IL.

Topics:

Leave a Reply

Management Stories

LegislationUSDA: Quick Implementation Of Disaster Assistance Programs A ‘Top Priority’
July 9, 2014
USDA has processed 106,000 payments to farmers in 40 states across the country who suffered livestock and grazing losses between Oct. 2011 and passage of the 2014 Farm Bill. Read More
LegislationTFI Praises White House For Signing WRRDA Into Law
June 11, 2014
The bill streamlines U.S. Army Corps of Engineers projects, prioritizes authorized waterway improvements and provides needed adjustments to the Inland Waterways Trust Fund. Read More
Allied Cooperative Grain Plant
ManagementAllied Cooperative, Arcadia Co-op Plan Merger
June 10, 2014
The Board of Directors of Allied Cooperative and Arcadia Co-op recently signed a letter of intent for a merger between the two cooperatives. Read More
EmployeesSyngenta: ‘Take Charge’ Of Farm Safety
June 4, 2014
Syngenta and health officials warn of four health-related challenges in agriculture and how they can be managed. Read More

Trending Articles

Green Valley Ag facility
Retail FacilitiesGreen Valley Ag Adopts A.J. Sackett’s Precision Fertilizer Blending® Technology At New Facility
July 8, 2014
Sackett's Precision Fertilizer Blending® Technology is making huge strides around the world. Green Valley Ag adopts the technology at its new facility to support its advancing agronomic needs. Read More
Retail FacilitiesWaconia Manufacturing Builds Facility Designed For Speed, Efficiency
July 7, 2014
To make its new hub facility more efficient, Cooperative Elevator enlisted the aid of Waconia Manufacturing. Read More
EquipmentSummer Show Preview 2014: Superior Sprayers Take The Field
July 3, 2014
In this final installment of our coverage of the major categories of Big IRON that retailers can expect to test-drive at this summer’s events, here is a look at 19 sprayers. Read More
Scouting a soybean patch at Green Valley Ag.
EmployeesCropLife Compensation Survey: Battling Talent Drain
July 2, 2014
Retailers too often lose employees to companies outside of agriculture, while recruiting efforts are most often limited to competitors and other ag-focused organizations. Read More
HerbicidesDow AgroSciences Introduces SureStart II Herbicide
June 16, 2014
The enhanced formulation has improved viscosity and increased stability under heat and controls more than 60 high-anxiety grasses and broadleaf weeds found in corn fields. Read More
HerbicidesBASF Investing $270 Million To Expand U.S. Herbicide Production
June 11, 2014
BASF has invested more than $270 million to expand herbicide production capacities in the U.S., including more than 20 new products to be launched over next two years. Read More

Latest News

LegislationUSDA Implements Key Farm Bill Crop Insurance Provision
July 30, 2014
The new Supplemental Coverage Option, available through the federal crop insurance program and set to begin with the 2015 crop year, is designed to help protect producers from yield and market volatility. Read More
CropLife 100Wilbur-Ellis Forms New Organizational Structure For Its…
July 30, 2014
The new structure will provide more responsive internal support and will allow regional vice presidents and area managers to spend more time with customers, on talent development and on operational excellence across branches. Read More
Palmer pigweed in cotton
HerbicidesNew Training Modules On Herbicide Resistance Now Availa…
July 30, 2014
The Weed Science Society of America has announced the availability of three new education modules on herbicide resistance in weeds. Read More
HerbicidesWillowood To Market Glufosinate
July 28, 2014
Willowood USA recently announced that Federal EPA has approved its technical registration for glufosinate. Read More
InsecticidesHow To Scout For Corn Earworms In Corn
July 28, 2014
In her weekly report, University of Missouri Agronomy Specialist Jill Scheidt discusses what to look for when scouting for corn earworm. Read More
Crop InputsDuPont Pioneer, Weyerhaeuser Enter Technology License A…
July 28, 2014
The agreement brings together agricultural and forestry know-how to sustainably improve crop productivity for corn growers around the world. Read More
EquipmentAGCO Launches Global iPad App
July 28, 2014
The free AGCO Global iPad App can be downloaded from the Apple iTunes Store and features the full family of RoGator self-propelled sprayers and TerraGator high-floatation spreaders. Read More
Eric SfiligojYuma Centennial Ag Supply Earns 2014 National Environme…
July 28, 2014
Colorado-based ag retailer receives top trophy in 24th annual DuPont Crop Protection/CropLife ceremony. Read More
CropLife 100Pinnacle Forms Alliance With Wildlife Managment, Seed O…
July 25, 2014
The strategic alliance will provide Tecomate with key wildlife products, processing facilities, distribution centers and sales through Pinnacle’s ever-growing retail network. Read More
ManagementFranken Presses White House On RFS Support
July 25, 2014
Al Franken and a group of Senate democrats recently met with senior White House official John Podesta to urge the administration to change its position on an EPA proposal. Read More
ManagementASA, FarmLink To Launch ‘Operation Benchmark̵…
July 25, 2014
The American Soybean Association (ASA) and FarmLink are teaming up to help farmers close the $11 billion gap between what they harvested in 2013 and what they could harvest annually. Read More
StewardshipNorthey: Farmers Commit $1.4 Million to Try New Water Q…
July 25, 2014
The practices that are eligible for funding include cover crops, no-till or strip till and using a nitrification inhibitor when applying fall fertilizer. Read More
Precision AgFarmers Learn How Changing World Will Impact Iowa
July 24, 2014
Technology and understanding global consumer demand for Iowa farm products brought hundreds of farmers and agribusiness leaders to Ames recently for the annual Iowa Farm Bureau Federation Economic Summit. Read More
HerbicidesPurdue: Late Season Weeds May Require Manual Removal
July 24, 2014
Hand-rouging and pulling late season weeds by hand may be the best way to remove them, more so than using a herbicide, a Purdue Extension weed scientist says. Read More
Soybean Field
InsecticidesTransform WG, Closer SC Insecticides Receive R&D 10…
July 23, 2014
Dow AgroSciences has received the award from R&D Magazine for Transform WG insecticide and Closer SC insecticide with Isoclast active. Read More
EquipmentKinze, Raven Team Up On 4900 Planter Monitor
July 23, 2014
Kinze Manufacturing announces a partnership with Raven Industries to develop a standalone monitor solution for the Kinze 4900 series planter. With this new Read More
LegislationNew Farm Bill Continues To Confuse As Growers Await USD…
July 23, 2014
The new five-year Farm Bill eliminates many of the direct payments previously payed to growers and could benefit from USDA clarification, reports a Toledo Blade columnist. Read More
EquipmentPrecisionAg.com Relaunches With Responsive Design For M…
July 22, 2014
PrecisionAg, the worldwide leader in precision agriculture information and analysis, announces the launch of its completely redesigned website, PrecisionAg.com. Read More